China builds new legal shield against foreign sanctions with tougher investment rules – Firstpost

China on Monday unveiled sweeping new regulations governing overseas investments, giving Beijing expanded powers to scrutinise, block and even unwind cross-border transactions involving Chinese investors, technology and sensitive data as it strengthens its defences against growing Western sanctions and investment restrictions.

The new rules, issued by the State Council and due to take effect on July 1, provide a formal legal framework for authorities to intervene in overseas deals that they believe could affect national security or strategic interests. The measures also allow Beijing to retaliate against foreign entities and governments that restrict Chinese investment.

The move comes amid escalating tensions between China and the United States over technology, trade and national security. Analysts say the regulations are part of a broader effort by Beijing to tighten oversight of outbound capital flows while safeguarding strategic sectors such as artificial intelligence, semiconductors and advanced manufacturing.

The framework follows China’s recent intervention in the acquisition of AI startup Manus by Meta, which authorities said violated foreign investment laws. The case highlighted Beijing’s growing concern over the transfer of technology, intellectual property and talent to foreign investors.

Under the new rules, Chinese authorities can review overseas investments and asset transfers, order investors to divest holdings, halt transactions and impose penalties on individuals or companies that fail to comply. Exports of restricted technologies, services and related data will also require official approval.

A key provision targets cross-border transfers of technical personnel and expertise in sensitive industries. The regulations prohibit companies from moving technology through overseas staff deployments, training programmes or technical guidance without authorisation, closing loopholes often used by firms relocating operations abroad to attract foreign investment.

The measures also establish a stronger retaliatory toolkit. If foreign governments impose restrictions on Chinese companies or investments, Beijing could respond by blocking unrelated deals involving firms from those countries, limiting their business activities in China or revoking visas and work permits for employees.

The latest regulations are part of a wider push by China to strengthen export controls, secure critical supply chains and reduce vulnerability to external pressure. Together, they signal a more assertive approach to managing technology, capital and strategic assets at a time of intensifying geopolitical competition.